If no payments are made for 270 days, the loan is considered in default, and the government may begin collection efforts including garnishment. To avoid garnishment, borrowers can seek loan rehabilitation, which allows them to get out of default by making nine consecutive, on-time monthly payments based on their income.

The Department has not collected on defaulted loans since March 2020. A pause on student loan payments during the pandemic was extended in 2022 when the Biden administration said it would cancel student loans for more than 40 million borrowers, however, the Supreme Court threw out that decision a year later.

Then the Biden administration instituted a 12-month "on-ramp period" through September 2024 that froze notices to credit agencies about missed payments. “By the end of 2024, those borrowers with loans in delinquency or in default saw scores that were 103 and 72 points higher, respectively, than at the end of 2019,” the New York Fed said in a blog post.

While Congress mandated that student and parent borrowers begin to repay their student loans in October 2023, the Biden administration failed to lift the collections pause and kept borrowers in a confusing limbo.

President Biden sought to continue providing student debt relief, as he did throughout his presidency, through cancellations for specific groups, such as those with permanent disabilities or those who attended schools that defrauded students. By the time he left office, he had forgiven $183.6 billion in student loans for more than 5 million borrowers.

In February, a federal appeals court blocked the Biden administration’s $475 billion Saving on a Valuable Education (SAVE) student loan relief plan. The court sided with the seven Republican-led states that filed a lawsuit against the U.S. Department of Education’s SAVE plan.

Related: Nearly 10M ‘delinquent’ student loan borrowers will see credit scores drop: Federal Reserve Bank

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” said Secretary of Education Linda McMahon. “The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away … Hundreds of billions have already been transferred to taxpayers. Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly … which means helping borrowers return to repayment.” 

FSA will restart the Treasury Offset Program on May 5. All borrowers in default will receive emails from FSA over the next 2 weeks making them aware of these developments and urging them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation. Later this summer, FSA will send required notices beginning administrative wage garnishment.